Guidance notes

QSR (Preparing) Focus Note

Focus note with guidance for surveyors who have been instructed by Managing Trustees to prepare a qualified surveyor's report (QSR) in the form of questions and answers. The Focus note explains the role of Managing Trustees and TMCP to help surveyors understand who they are acting for, what their clients need advice on and how to ensure their QSR can be approved by TMCP

Section A - Introduction

This Focus Note has been prepared as a briefing note in the form of frequently asked questions to help surveyors instructed by Managing Trustees of Methodist property to understand their client and to prepare the Qualified Surveyor’s Report (QSR) required under s.119(1) of the Charities Act 2011 (2011 Act). This Focus Note is to be read in conjunction with the QSR Focus Note.

References in this Focus Note to “the Regulations” are to the Charities (Qualified Surveyor’s Reports) Regulations 1992. The Regulations are set out in Statutory Instrument 1992 No.2980.

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Section B - Frequently Asked Questions

B1 Who owns the property?

The legal owner of nearly all Methodist land and property is the Trustees for Methodist Church Purposes (TMCP). TMCP holds legal title in its capacity as Custodian Trustee on trust for the local Managing Trustees. The property is held on the Model Trusts of the Methodist Church contained in Part III of Schedule 2 to the Methodist Church Act 1976. This means that legal Title is vested in TMCP and TMCP is the registered owner of the property.

However, TMCP is a Custodian Trustee body and is NOT involved in the day to day control and management of the property. Custodian Trustees are not charity trustees. While TMCP is not your client TMCP Legal will need to see and approve the QSR to ensure that it complies with the Regulations.

B2 Who is instructing you to prepare the QSR?

The property is managed locally by a body of Managing Trustees, the charity trustees. It is the charity trustees who have ultimate responsibility for governing or running the charity. The managing trustee body will usually be the local Church Council or Circuit Meeting but could be other trustee bodies such as District Trustees, Connexional Manse Trustees or the Methodist Council. Please ask your clients to confirm which managing trustee body they belong to/ which charity is instructing you if you are unsure.

It is the Managing Trustees to whom you owe your duty of care. The individuals comprising the managing trustee body are usually unpaid volunteers. Whilst the body may include surveyors and those with property experience, it could be comprised of individuals who have no experience of disposing of property whatsoever. Whatever the position, your clients are charity trustees and the charity is relying on you to advise it how to ensure that a disposal is in its best interests.

B3 Why does TMCP need to see the QSR?

As Custodian Trustee, TMCP is obliged to act, whether to transfer property or to grant a lease, on the lawful instructions of the Managing Trustees. Checking that a 2011 Act compliant QSR has been prepared is part of this role.

As prudent charity trustees the Managing Trustees should act on the advice of their professional advisers. If the disposal departs from your recommendations in the QSR TMCP Legal may ask you to follow up your original advice to confirm whether you agree with the course of action that the Managing Trustees are now proposing to take.

B4 Why would TMCP not "approve" the QSR?

For consistency and to ensure compliance with the Regulations, TMCP Legal will not be able to confirm approval of a QSR unless all nine paragraphs of the Regulations have been addressed.

To ensure approval, please deal with each of the nine paragraphs in the Regulations. If you think a paragraph is not relevant or you feel that you are not able to comment e.g. as regards paragraph 7 on VAT, please confirm that this is the case rather than staying silent on any point.

B5 Do some properties have additional requirements that I need to be aware of when preparing the QSR?

Methodist property includes a vast array of different property types including but not limited to residential properties, chapels, Sunday schools, land, tennis courts and disused burial grounds. Please note the following points:

B5.1 Burial grounds

Disused burial grounds must be disposed of by way of the grant of a long lease and not a freehold transfer. If the burial ground is being sold together with other property such as a chapel, the building should be transferred separately under a freehold transfer. Please ask your clients to let you have a copy of the Burial Ground Sale Focus Note which sets out the particular requirements for the disposal of disused Methodist burial grounds, including the burial ground covenants that must be imposed so that you can bear this in mind when valuing the property. You will also need to address the following:

How long should the term of the lease be?

How should any agreed sale price be apportioned between the leasehold and freehold elements?

Do any rights need to be reserved over the freehold element being disposed of to benefit the Church’s interest in the retained freehold such as rights of access?

B5.2 Sales of part

Please provide your recommendations bearing in mind the need to both maximise the value of the part of the property being disposed of and to safeguard the current and future uses of the retained land as well as its value. This includes saleability and development potential. Please talk to your clients, if you have not done so already, to see what their proposals for the retained land are now and in the future: Are your clients simply holding onto the land for now with the intention of selling it in the future? If the value or saleability of the whole outweighs that of its parts, should any other options be considered? Do your clients want to use the proceeds of sale (subject to the Circuit ring-fencing funds) to develop/ remodel the retained land? Is there potential to invite offers from developer buyers who would work with the Managing Trustees to redevelop the retained land as part of their scheme for the entire site? If this is a possibility please contact TMCP so that TMCP Legal can provide further guidance on how this can be achieved in accordance with Methodist law, policy and best practice.

B5.3 Property with development potential

If you identify that a certain property has development potential, the Managing Trustees will be looking to you to recommend what steps they need to take to obtain best price in all the circumstances. Does your valuation take into account the development potential? Do the Managing Trustees need to obtain pre-planning advice to gauge exactly what potential the property has to allow you to confirm this? Should the charity obtain outline or full planning permission and market the property with the benefit of that planning permission? Should the Managing Trustees leave it to the eventual buyer to pay any planning costs and obtain the planning permission that they actually want? Should overage be considered?

B6 The charity has already decided what it wants to do and just wants me to rubber stamp their decision, is this ok?

Although those instructing you may want you to simply confirm that the proposal is a great deal for the charity, ultimately the Managing Trustees as charity trustees will be relying on your professional advice particularly if questions were to be raised at a later date as to why a course of action was taken.

For the QSR to be approved by TMCP, it would still need to address all nine paragraphs of the Regulations. It would be helpful to the Managing Trustees if you could expose any problems with their proposals or make recommendations to ensure that the terms are in the best interests of the charity. Are there any other options that should be considered? Should the market be tested to ensure that the offer on the table is the best deal out there? If not, why not?

Managing Trustees are encouraged to commission a QSR as early as possible so that their surveyor can advise the charity how best to dispose of a charity asset. As a professional you may agree with what the Managing Trustees want to do and be able to explore their chosen course of action with them and advise them how best to achieve the desired outcome. Alternatively you may have severe misgivings and recommend that the Managing Trustees explore alternative options (paragraph 9 of the Regulations).

This situation often arises when it isn't a case of a simple outright disposal, but a desire to sell off part of a church site to finance the remodelling or redevelopment of the retained land to create worship and ancillary space that better suits the needs of today's congregation and provide better outreach facilities. In some cases the Managing Trustees instruct a surveyor to prepare a QSR after finding a developer who agrees to redevelop the part of the church site to be retained, to create fit-for-purpose worship and ancillary space, in exchange for the rest of the church site, which they will then use for development. It would be very helpful to the Managing Trustees if you could look at the transaction objectively and confirm whether the deal is in the best interests of the charity. Could the Managing Trustees raise more funds to remodel the retained land via a sale on the open market? Would the build cost the charity less if they instructed somebody else to undertake the work? Should the Managing Trustees test the market before accepting what is on the table? What is the value of the part of the site being transferred? Do the build costs tally with this if viewed objectively? Are the proposed build costs a good deal for the charity?

B7 Why am I being asked to provide an update to the QSR?

Whilst it is not a requirement under the Charities Act 2011, it is a recommendation of the Charity Commission, adopted as policy by TMCP, that a QSR should be no more than six months' old at the point that contracts are exchanged. Often there will be a delay between commissioning the QSR and finding a buyer and it will be necessary for an update. If you feel that the advice given in the original QSR is still valid, please confirm that this is the case in writing. A scanned letter sent by email or an email with your email signature is fine. If you feel that your advice does need updating then please provide a written update or new QSR.

B8 My recommendation is that the property should be sold at auction. Is there anything else I should be aware of?

It would be helpful to the Managing Trustees if you could recommend an appropriate auction date for the Managing Trustees to work towards: Would it be in the charity’s interests for the property to be placed in a later auction so that it can be advertised in the catalogue perhaps more fully than time allows before the immediate auction date? Would it be in the charity’s best interest to wait for an auction in a particular season i.e. before or after winter? You may also be able to recommend an auctioneer with experience of selling this type of property or a type of auction or auction date that attracts buyers looking for this particular type of property.

B9 The Managing Trustees have asked me to prepare a QSR in respect of a lease – are there any particular requirements?

A full QSR is required where the proposed disposition is the grant a lease of more than 7 years. The requirements for the QSR are the same as with a sale; all nine paragraphs of the Regulations must be addressed.

In terms of paragraph 2 of the Regulations, please ask the Managing Trustees to let you have a copy of the Non-Residential (Landlord) Lease Heads of Terms before you prepare the QSR. Please have regard to these Heads of Terms when advising the charity as to the terms of the lease to ensure that such terms are in accordance with Methodist law, policy and best practice. If you are involved in the lease negotiations then please do ensure that terms are not agreed that conflict with the Non-Residential (Landlord) Lease Heads of Terms. Please speak to TMCP if you have any queries.

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Disclaimer

Please note that this document is to provide guidance and assistance to Managing Trustees and their professional advisers. This guidance note is general in nature, may not reflect all recent legal developments and may not apply to the specific facts and circumstances of any particular matter.

Also note that nothing within the documents and guidance notes provided by TMCP nor any receipt or use of such information, should be construed or relied on as advertising or soliciting to provide any legal services. Nor does it create any solicitor-client relationship or provide any legal representation, advice or opinion whatsoever on behalf of TMCP or its employees.

Accordingly, neither TMCP nor its employees accept any responsibility for use of this document or action taken as a result of information provided in it.

Please remember that Managing Trustees need to take advice that is specific to the situation at hand. This document is not legal advice and is no substitute for such advice from Managing Trustees' own legal advisers.

If you have any queries about preparing a QSR for Methodist property please feel free to contact TMCP Legal.